Book review: The Checklist Manifesto by Atul Gawande

Saturday, May 23rd, 2015 10:51 am

[The Checklist Manifesto: How to Get Things Right Paperback by Atul Gawande]

The author did a great job in bringing out the importance of checklists across different domains. What seemed like a simple concept to grasp got the much needed attention with the excellent examples provided in the book. It was great to see him admit to his own fallibility in adopting the checklist and in explaining that there are more important things than your ego when it comes to preventing the stupid mistakes. In medicine, these stupid mistakes could prove dangerous. The author is an experienced surgeon and medical stories in the book were well thought out and eloquently explained.

I was particularly impressed with the 3-yr old austrian girl drowning story and it made me realize how far science has come in bringing someone back from near-death. The other stories from the operating room made me perk up and listen closely for the medical terms and the ensuing diagnosis. It was funny to hear of St. Stephen’s hospital’s influx of patients on a daily basis [your’s truly was born there].

The message is clear. With so much going on in our daily work and other parts of life, it makes sense to keep a checklist of where we are in the process and not lose sense of direction.

A good book overall!

My notes:

– Stab wound from Bayonette in SF. Nobody asked how you were stabbed?

– Cancer of stomach and heart stop mid-way through the operation. potassium overdose. Ton of Glucose + Insuling + Albuterol to bring back the heart.

– Story of girl drowning in Austrian lake – 2.5 hours of lifelessness, brought back to life and cured in two weeks.

– science identifies 13000 ways our bodies can fail.

– On 30 oct 1935, dayton ohio, Boeing model 299 introduced in flight competition for Army bombers. It crashed due to pilot not having a checklist for how to fly this then complicated machine. Later, Checklist introduced and the plane few 1.8 mil miles with no accident.

– 4 Basic physiological data points

a) Body temperature

b) Pulse

c) Blood pressure

d) respiratory rate

and now e) pain level

– Nurses are credited with coming up with the above points in 1960s and other charts.

– Checklist for structural designs/ Building industry – advent of tracking and communication.

– Failure of FEMA during hurrican Katrina. Story of Walmart stepping up – case study in Harvard by Lee Scott.

– Rialto’s kitchen (Jody Adams and her staff) in Boston and their use of checklist.

– In 1854, Dr. Snow in london traced sudden deaths (200 died in 2 days, 500 died in week) to a water borne disease from a nearby well.

– Soap use in Karachi experiment. Free soap as an incentive leading to less deaths and infections

– 4 causes of bad surgery

a) Bleeding

b) Anesthesia

c) Infection

d) Unexpected

– Flight checklist. United flight to honalulu and door goes ajar. the problem is unless you are down to 8000 ft, the passengers can’t breath well due to lack of oxygen. (oxygen masks are built for max of 10 minutes). Only 1 in 500k flights have any issues. Story of flight 1459 hitting flight of geese. Capt. sullenberg.

Book review: The Greatest Trade Ever by Gregory Zuckerman

Sunday, May 17th, 2015 11:55 am

[ The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial by Gregory Zuckerman ]

After having just finished The Big Short by Michael Lewis , I was a little hesitant to touch the book. The story is almost the same with this book but with a focus on John Paulson. The Big Short didn’t have a lot of mention of JP and I wanted to hear the “behind-the-scenes” story that ensued from a different angle. Although there was a big overlap of the characters, it was interesting to see two authors validate the events in their own way. I was happy to go through the excellent narration of Mark Cashman.

The book was inspirational in a lot of ways. The fact that – you don’t have to know the entire technicalities of an industry to understand the problems with it [in fact, it helps if you are an outsider], that you can earn more money if you have the right network and conviction to go through the thick and thins of daily chatter, you don’t have to be the first to get in on a trade and that you don’t have to be genius to figure out everything by yourself – was great to hear.

The side stories of Mike Burry, Jeffrey Green, Greg Lippmana and Andrew Ladhe provided a great sense of perspective into the monies that were made. A great story overall.

– El dorado aka the city of gold.

Amit

My notes:

– Started Paulson & co. in 1994

– Married his romanian assistant in 2000

– In 1992 George Soros bet against the british pound and made $1 bil.

– JP stayed with rich uncle in Ecuador (Quito and Salinas). Started shirts business, flooring business (made $25k for 10% of $250k sales) when young.

– Went to NYU and then cited his floor business for entry into Harvard.

– At Harvard, JP heard Kohler of KKR talk about using $500k to buy $36mil business, only to sell it six months later pocketing $17 mil.

– Paulson accepted Job at BCG after graduation.

– At BCG, he heard about Allen and Co. founder buying Columbia Pictures cheap – owing to accounting issues and later sold it for Coca cola shares worth billions.

– JP met Kohlberg at some point and asked for job or reference. Kohlberg called Oppenheimer for him. Days later, Oppenheimer split. Leon Levy and Jack Nash started Odyssey Partners and brought JP with them. Levy once paid $50 mil to buy big bear stores and immediately recouped by claiming fee of $50mil and eventually earning $160 mil profit. Paulson’s focus there was looking for underappreciated conglomerate selling cheap. e.g. Transworld which had a troublesome business in TWA but profitable businesses in Hilton hotels and Century 21 would benefit from splitting.

– Until 1970s, half of america had no mortgage debt. How we got into debt – Credit. MasterCard’s priceless campaign. In 1977, Debt Collaterization (sell debt to investors) came into being. Buying homes (even on credit) led to better neighborhoods and better academic achievement. Cheap rates were available now. Later, Brad Morrice co-founded New Century to help people with bad credit but higher rates. New century would sell this to investors seeking higher rates. New Century later went IPO to become the second largest subprime lender after countrywide financial. David Einhorn bought into the firm and sat on the board. Later ARMs were introduced and people were given credit/homes without any paperwork with a lure that they can always refinance their then-higher priced homes at lower rates. e.g. Alberto and Rosa Ramirez, strawberry pickers getting $720k loan. And a mariachi singer claiming six figure income, when couldn’t prove it, had a picture taken in front of his house with mariachi and qualified.

– Paolo Pellegrini, JP’s assistant played a key role in identifying the bubble. He understood CDS contracts and asked Paulson to look into it. Mike Burry and Greg Lippman were already into this by then. Greg then helped create standardized CDS in dec 2005. Robert schiller in 2004, came out with a book called Irrational Exuberance where he showcased that US real estate prices rose a meager 0.4% between 1890 – 2004 but 6.2% b/w 1997-2004.[indirectly hinting at real estate bubble]. Pelligrini hired 1010data [ https://www.1010data.com ] to gain insight into 6 million mortgages historic performance and learnt the bubble was imminent and fast approaching. Bill Ackman had pointed out MBIA troubles two years before JP started shorting it. JP later approached Bear Sterns to create CDOs they could short.

Feb 9 2006, new century financial reported losses,[year end results are audited by accounting firms] which led to ABX decline to 5% ($2 bil profit for JP’s firm). Later, New Century went bankrupt.

– Story of Jeffrey Green (first individual to get ICSA and essentially buy CDS contracts), Mike Burry and Greg Lippman and Andrew Lahde were side stories leading to similar end result (profits for them) as JP’s.

– Funny: Green once afraid of his bet due to govt intervention, called HOPENOW (govt program to help underwater home owners) and was told to stop making payments and save money for a new one. Green was friends with Jeff Libert, JP’s boss at Bear sterns who taught him real estate returns were meager in long term but had shot up in the last few yrs.

Fund growth:

– 1994 (2 mil of JP’s money)

– 1996 ($16 mil)

– 1997 ($100 mil)

– 1998 ($50mil)

– 2001 ($200 mil)

– 2002 ($300 mil)

– 2003 – 1.5 bil

– 2004 – 3 bil

– Profits: In 2007,

a) Paulson made $4 bil. [$10bil within 2 yrs for him firm].

b) Pelligrini made $170 mil.

c) Burry made $40 mil.

d) Green went from $100 mil to $500 mil. largest gain ever by individual.

e) Andrew Lahde made $10 mil for himself. $75 mil for his fund in 15 months.

– JP rode buses or train and had no car/driver despite all the success.

Book review: Antifragile by Nassim Taleb

Sunday, May 10th, 2015 9:47 am

[Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb]

I think the book should have been organized in the reverse way. The second half of the book had more examples and explanations than the first half which made the concepts easier to grasp. I wanted to go back to the beginning once I understood the concepts in understanding what the author was really trying to say. Please forgive but i couldn’t hear the part where the author explained ‘The Bed of Procrustes‘ was actually a book that he wrote and that ‘Procrustean bed of modernity’, ‘Iatrogenics’, several greek references took a little bit more time to understand.

The no-nonsense, brash attitude of the author made me chuckle often throughout the journey. He wasn’t shy about calling out Alan greenspan, Hillary Clinton, Tom Friedman and others a ‘fragilista’ for various reasons. The book in itself sits on top of other existing concepts from the author – either via his previous books or generalization of overall theme – but can be applied easily to all walks of life without knowing the complex vocabulary I saw explained. The book can be boiled down to

Weigh pros and cons of everything and try to identify the best and worst case scenario before making any decision.

Randomness in some form is good for you. Allow variability for a stable system.

Mother nature knows best.

Learning by trial and error is great. Be a tinkerer.

I think the author has identified some valuable BS indicators for us to learn from.

-A

My notes from the book:

– Anything that has more upside is Antifragile

– Hydra – snake whose head is cut-off and will grow two more. represents antifragility

– phoenix – bird born again from the ashes

– limited low dose poisoning strengthens health (snake bite)

– broken systems help build better systems e.g airline industry.

– reinsurance companies – if they can limit their losses are antifragile. They charge enough for regular insurance, they charge even more in case of calamity when the premiums go up.

– entrepreneurs as source of anti-fragile for the society.

– Financial barbells as a solution to antifragile. (extreme caution vs max. risk with no middle ground). Find a balance where max you lose is little and the max you again is a lot.

– Antidote to black swan – embrace randomness (humans underestimate randomness and are shocked to see it).some randomeness is good.

– Guy Deutscher noticed that primitive tribes weren’t color blind but had only few names for colors. Also they were able to tell different colors with the string matching. Why dont you have name for it? known but not expressed. “blue” is “deep ocean”. Antifragility is known concept but not expressed.

– exercise – body’s response to counteract weightlifting

– big stress (snake on a keyboard) help you once you are over it but the slow daily stress – commute, filling out forms, bosses – harmful for your body.

– post-traumatic growth = redundancy e.g. two kidneys. you can get most loan when you dont need it.

– Stability without volatility is dangerous. vaccine as a small pain for better. european peace for years and then a big turmoil. hackers make system strong.

– procrastination as a good thing (let the nature tell you if its important). author’s spine issues disappearing after hiking and weightlifting. If you have to think to pick from options, DONT. it should come natural.

– Engineers -> practice (trial and error). better suited. traders dont learn math – they figure out by trial and error e.g. a kid doesnt need to know aerodynamics to ride a bike. A weightlifter doesnt need to understand biology the effect is the same. the explanations have always changed.

– subtractive epistomology – removing what is wrong. people win in chess by not losing. people get rich by not going bust. religion is more about not doing wrong. pope asked michaelangelo how he sculpted statue of david. easy – I just remove what’s not david.

– what is fragile? when you listen to people who dont have skin in the game (policy makers)

– sword of damocles – hanging over head and is quiet and silent but will fall when you least expect it

– Evidence of Absence doesnt imply absence of evidence. e.g. go to mexico and ask people their salaries. of the 100 mil people, Carlos’ salary is more than 90 mil combined. Data wont give you unless you encounter rare events.